Late last year, Congress stealthily passed language that would significantly restrict intoxicating hemp-derived THC products, setting the stage for a federal crackdown that could bolster the state-legal cannabis industry by moving some portion of intoxicating hemp sales back into the state-regulated marketplace. The provision, included in a must-pass spending package, was framed as a way to close loopholes created by the 2018 Farm Bill that allowed psychoactive products to proliferate with little oversight.
If it holds, the shift could benefit the regulated cannabis industry in several important ways. For years, state-licensed operators have competed against intoxicating hemp products that face fewer rules, lower taxes and little, if any, enforcement. Reining in that imbalance could restore a measure of pricing power to regulated markets that were designed to prioritize safety, testing and transparency. But the outcome is far from settled.
Legislative Reality Might Impede Implementation
Even as cannabis and hemp operators alike prepare for the new restrictions, multiple bills are moving through Congress that would delay, narrow or effectively overturn the moratorium. Supporters of those efforts argue that an outright ban risks sweeping too broadly and harming responsible hemp businesses, while opponents warn that rolling back enforcement would perpetuate an existing market for unregulated and non-age-gated intoxicating products.
Current law prohibits certain hemp products beginning November 12, 2026, which effectively creates a nine-month runway for the market. That timeline matters. Given the supply chain issues and need for inventory management, most retailers will begin to limit new orders and work down inventories well before the November 12 deadline. As a result, pressure will build on policymakers in the coming months to find a solution before the supply chain grinds to a halt. However, lasting solutions are likely to be elusive in the near term, given the complexity of arguing for different regulatory regimes for the same plant. It is hard to argue that THC products from “hemp” should be viewed differently from THC products derived from “cannabis” when they’re the same plant. The hemp industry’s solution is to extend the deadline, allowing Congress and regulators more time to come up with that lasting regulatory approach. However, an extension without regulation is untenable for many legislators.
The Advantages of State-Regulated Cannabis
Notwithstanding the potential for an extension of the November 12 implementation date, restrictions on hemp-derived products at the State level are progressing. States like Ohio and Connecticut have been implementing bans or severely restricting product sales. If coupled with enforcement actions, these state restrictions could meaningfully limit product availability, sending a portion of those consumers into the state-regulated cannabis ecosystem earlier than November.
State-licensed cannabis operators operate under rigorous compliance regimes that include testing, security, reporting and taxation and are designed to prioritize safety and transparency. For years, intoxicating hemp products have competed outside those frameworks, distorting pricing and siphoning demand away from regulated channels. That imbalance has weighed on margins and contributed to the industry’s prolonged period of price compression.
As intoxicating hemp products recede, if enforcement holds, regulated cannabis stands to regain pricing power at the margin. This does not imply a return to hypergrowth, but it does open the door to modest growth, particularly in newer or expanding markets such as Virginia, Minnesota, Delaware and Ohio. Additionally, markets with a significant intoxicating hemp presence, such as Florida, will also benefit from the scheduled reform.
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The Limits of Federal Legalization
Federal action alone will not fix a fragmented marketplace. If states fail to enforce new rules consistently or create alternative carve-outs, the industry risks replacing one gray market with another. Regulatory arbitrage is resilient and markets respond quickly to uneven enforcement.
The broader question policymakers must confront is whether they want a coherent safety-focused cannabinoid framework or a patchwork that continues to reward avoidance over compliance. Regulated cannabis operators have invested billions of dollars in infrastructure and oversight to meet voter-approved mandates. Undermining those investments erodes credibility and delays the market’s path to maturity.
This moment represents an opportunity to reset expectations. A rational approach to a singular regulatory framework for the plant makes common sense, follows the science and fits nicely into the existing regulated industry that has operated responsibly at the state level for years.
The direction of travel is clear. What remains uncertain is whether policymakers will cave to intoxicating hemp industry special interests.
Anthony Coniglio is the president, chief executive officer and board of directors member of NewLake Capital Partners, an internally-managed real estate investment trust that provides real estate capital to state-licensed cannabis operators through sale-leaseback transactions and third-party purchases and funding for build-to-suit projects.
